Public Profit Sharing

19 Pages Posted: 21 Feb 2003

See all articles by Ronnie Schöb

Ronnie Schöb

Freie Universitaet Berlin; CESifo (Center for Economic Studies and Ifo Institute)

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Many countries suffer from persistently high unemployment rates. The scope for labour market reforms is often limited to measures that hurt neither shareholders nor workers. This paper develops a policy proposal, which allows the government to reduce wage costs without changing the income positions as determined in the process of wage negotiations. It is shown that the introduction of public profit sharing, i.e., substituting profit shares for social security contributions, can boost employment both in the short run and the long run. Calibrating the model and comparing the results with recent empirical findings about the impact of labour taxation confirm the theoretical findings.

Suggested Citation

Schöb, Ronnie, Public Profit Sharing. Kyklos, Vol. 55, pp. 523-542, 2002. Available at SSRN:

Ronnie Schöb (Contact Author)

Freie Universitaet Berlin ( email )

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Berlin, Berlin 14195

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679

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